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MUMBAI: The Anil Dhirubhai Ambani Group (ADAG) has embarked on a plan to cut its debt, but stock market investors are not enthused yet. Shares of Reliance Communications hit yearly lows on Tuesday, Reliance Power touched a 52-week low last week while Reliance Capital and Reliance Infrastructure too have weakened of late.

So, why are investors staying away from ADAG stocks? Analysts said market participants are not convinced with the extent of the stake sales so far to cut debt. “The recent news of stake sale in the group’s (ADAG) smaller companies is worrisome when the group has debt of over several times that amount. Investors may be advised to stay away from these counters,” said Arun Kejriwal, director, KRIS Capital.

Reliance Communications has fallen 49% since its 52-week high in early June till date. Reliance Capital has fallen 28.3% from its 52-week high in early June till date. Reliance Infrastructure has dropped 40% from the yearly high around the same time. The Nifty has gained 8%.

As on March 31, 2014, Reliance Communications has a current debt of around Rs 41,000 crore and is targeting to cut it to under Rs 20,000 crore in the next 24 months. As on March 31, 2014, Reliance Power has net debt of close to Rs 30,000 crore. Reliance Infrastructure’s debt is about Rs 24,000 crore.

To tackle its debt problems, the group has decided to sell Reliance Media Works’s multiplex business to Carnival Films. The deal will help Reliance Group reduce its overall debt by around Rs 700 crore.

Analysts said the group is also pinning its hopes on stake sales in Reliance Capital’s various businesses, mainly insurance, to cut debt. A lot would depend on the passage of the Insurance Bill in Parliament. “In life insurance, Nippon Life is expected to increase its stake to 49% and in general insurance company is looking for a foreign partner to take 49% stake. The total inflow from these two stake sales is expected to be around Rs 4,000 crore ( Rs 2,600 crore from life insurance and Rs 1,400 crore from general Insurance),” said Espirito Santo Securities’s analyst Nidhesh Jain in a report on Reliance Capital late last month.

Brokers said that unlike the previous bull market, which ended in January 2008, investors’ aversion to companies with sizeable debt is high this time. “It is not a bull market for all stocks in the country,” said Saurabh Mukherjea, head of equities at Ambit Capital. “If you look back in July, the optimism was very high, but the exuberance from FIIs has died down and they are not going all out to invest in companies whose balancesheets are damaged.”